Philippines SEC Releases Draft Rules on Initial Coin Offerings

The draft has provisions on the types of tokens, registration processes and assessment for ICOs, reporting requirements, and conditions for exemption.

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Updated September 14, 2018: The Securities and Exchange Commission has extended the period for which the public and interested parties can send their comments and position papers about the draft rules on Initial Coin Offerings.

The Philippines Securities and Exchange Commission has finally released the first draft rules on initial coin offerings (ICOs). The landmark document includes the commission’s definition of the types of tokens, registration processes and assessment for ICOs, advertising, and even the process of reporting data to the commission.

This article aims to briefly discuss the contents of the draft rules and does not discuss its entirety. Everyone is encouraged to read the entire draft from the SEC website, which can be found at the end of the article.

Also, these are “draft rules” released by the SEC to solicit advice from the investing public (see the end of the article) so that it can be modified or updated, until it can finally release an “official rules or guidelines on initial coin offerings”.

Draft Rules on How to do an ICO in the Philippines

Clear Definitions

The draft opens with how the commission defines the terms such as ICOs, tokens, etc. Some of which are the following:

  • Initial Coin Offering (ICO) / Token Sale is the entire fundraising operation with different stages.
    • Crowd Sale, Token Generation Event, and Initial Token Offerings are defined as the main token sale of the ICO and are similar in meaning.
    • Pre-sale is a token sale conducted before the main crowd sale.
    • Private sale is a sale of tokens to early investors and is not open to the public.
  • Non-convertible and/or closed virtual currency is intended to be specific to a particular virtual domain or world and cannot be exchanged for fiat currency.
  • Fiat Currency is the legal tender of a country, such as the Philippine Peso.

Classification of Tokens according to SEC

The document also defines the classification of tokens

  • Asset Tokens – tokens that represent assets such as a debt or equity claim on the issuer.
  • Payment Tokens – tokens intended to be used as a means of payment for acquiring goods or service or as a means of money or value transfer.
  • Security Tokens – payment, utility, and/or asset tokens that satisfy the definition of securities under the Securities and Regulation Code (SRN).
  • Utility Token – tokens which are intended to provide access digitally to an application or service by means of a blockchain-based infrastructure.

Initial Assessment of Tokens

For companies planning to do an ICO, they will need to submit an initial assessment request, along with the requirements the SEC will ask for submission. This includes a certificate of incorporation, curriculum vitae of all team members, description of the ICO project, distribution plans, whitepaper, etc.

For ICOs whose projects are already in operation, operation manuals will be required. If the project is not yet in operation, the SEC requires detailed flowcharts and other documentation that show how the project will operate.

The ICO must also include in the application a description of the problems in the Filipino Market that the proposed ICO project aims to solve.

Action on Initial Assesment Request

The commission will review the request to determine whether the token is a security.

If the token is determined to be a security, the issuer must register the ICO project under the “rules on initial coin offerings”.

If the entity is a startup that will conduct or are conducting an ICO involving security tokens, it must register as a corporation. If the entity is a non-Philippine company, it must establish a branch office in the country.

How to Register Security Tokens

After the initial assessment, the issuer must register the ICO in accordance with the “rules on ICOs” not later than 45 days before the start of the pre-sale period. Required Submission in the registration statement include, among others, a cover page, operations manual, certificate of incorporation, curriculum vitae of all advisors, whitepaper, etc.

On Advisors

Any persons with reasonable or specific knowledge on security token ICO projects may file an application for registration with the commission.

Can I be Exempted from Registering my Security Tokens?

Yes, the draft rules mentioned a number of instances wherein the issuer does not to register the security tokens. Among them are the following (This is not a comprehensive list so please check the draft rules at the end of the article):

  • The security tokens are sold to fewer than 20 persons in the Philipines during any twelve month period.
  • The security tokens are sold to the following qualified buyers:
    • Bank
    • Registered Investment House
    • Insurance Company
    • Pension Fund maintained by the government or authorized by the Bangko Sentral ng Pilipinas (BSP)
    • Investment Company
    • Any other person deemed by the Commission as a qualified buyer.

Reportorial Requirements

The draft rules state that at all times the security token issuer must comply with the rules. Additionally, annual reports, quarterly reports, audit reports, financial statements must be regularly submitted to the Commission.

Miscellaneous Provisions

What if the ICO fails to reach its target?

The draft rules even have provisions in case the ICO did not succeed. For example, a report must be sent to the commission and the investors if the ICO has failed. The issuer must refund the proceeds in pro rata basis based on the amount of their investments.

What if I have an existing ICO?

The issuer must file an initial assessment request within three months when the rules come into operation.


Take note that these are “Draft Rules on Initial Coin Offerings” and not the “Official Rules on Initial Coin Offerings”. The commission is inviting interested parties, such as banks, investment companies, and the investing public to submit their views and comments on the proposed guidelines by August 31, 2018 to vgpfelizmenio[at], vcvargas[at], and jfbpatilleros[at]

The draft rules were issued on August 2, 2018.

Find the draft rules in this link. Also, the link to SEC website can be found here (PDF).

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